“Through want of enterprise and faith men are where they are, buying and selling, and spending their lives like serfs." - Henry David Thoreau
Americans place a high value on entrepreneurship. The way it is celebrated in our business schools, popular culture, and media, you’d think we had invented it. We didn’t, of course.
The first clue would be the word "entrepreneur" which - no surprise - is a loanword from French. It’s rooted in the Old French[i] “entreprendre” – “to undertake.” It’s hardly new. The word first appeared in Dictionnaire Universel de Commerce in 1723. The British of the time preferred the term "adventurer."
Both terms carry certain similar concepts: the entrepreneur or adventurer is embarking on an enterprise on their own, depending on their own skills, ideas, and interpretation of the marketplace to make profits, and to do so, they’re accepting the risk of a major loss.
In American culture today, entrepreneurship also includes the concept of far-sightedness, innovation, and creating value. But you need not be innovative to be an entrepreneur. Salesmen are entrepreneurs, since even if they work for a major corporation, they can be working on a salary-plus-commission basis; they’re depending on their sales skills to earn those commissions. In the 19th and early 20th centuries, entrepreneur was applied to theatrical promoters, producers, and managers of stage presentations. It was synonymous with another loan word, “impresario” from the Italian “impresa” which also means "undertaking.” Impresario was initially applied to producers of opera companies and – up through the 1950s -- to promotors or sponsors of particular entertainment events such as early television shows or boxing matches.
No definitive definition covers the scope of entrepreneurship, possibly because who the entrepreneur is and what the entrepreneur does changes as the market universe evolves.
It’s not as if we haven’t tried. The study of entrepreneurship goes back to the turn of the 17th century. Irish-French economist Richard Cantillon defined the term first in his “Essay on the Nature of Trade in General” (1755). He defined the entrepreneur as a person who pays a certain price for a product and resells it at an uncertain price, "making decisions about obtaining and using the resources while consequently admitting the risk of enterprise."
Cantillon considered the entrepreneur to be a risk-taker who deliberately allocates resources to exploit opportunities in order to maximize financial return, emphasizing the willingness of the entrepreneur to assume the risk and to deal with uncertainty. He drew attention to the function of the entrepreneur as distinct from an owner of a traditional business.
Another French economist, Jean-Baptiste Say, over two centuries ago in A Treatise on Political Economy (1803), saw the entrepreneur as a class of economic opportunists who would, by force of their business ingenuity, detect needs and opportunities for whole new businesses and inventions. Entrepreneurs, in his book, were the instigators in the story of progress.
In Say’s view, by redirecting resources, these self-motivated risk-takers would grow the economy or industry though innovation to fill gaps in consumer need or make use of underused or misdirected resources. Its dynamics are key to laissez-faire market efficiency, as showcased by Henry Ford in early 1900s and Bill Gates in the later. Even “purely” socialist economies must find ways to allow for and encourage new enterprise in order to grow – one of the deep-seated discontents that beset these centralized systems.
American culture has always been biased toward the entrepreneur. We had to be. Not only were our first colonists self-selected for risk-taking, they didn’t have much choice once they got here. If you needed something, you had to create it. Those early settlers who waited for the next supply ship from England usually died off in droves. Culturally, we intuitively celebrate the innovator and are deeply suspicious of large corporations – despite the fact that many are the grown-up offspring of the celebrated innovator.
Would it surprise you to learn that most US businesses—all but .3% (that’s point three, not three), are in fact small businesses, and that these employ about 48% of the workforce? It’s a diverse category, including Facebook and Google as well as Dr. Ho’s inflatable back brace seen on late-night TV ads. The top 15 most profitable start with accounting to legal services, real estate and medical offices, moving down to food trucks, for-profit schools and tutoring, and party services, and include plenty of professionals (legal, medical, and educators).[ii]
In the popular mind today, “entrepreneur” evokes a business creator. Yet it can also apply to a business owner – as in dry cleaning or food franchise – because they have skin in the game. A broader definition is sometimes used in economics, meaning an entity with the ability to find and act upon opportunities to translate inventions or technology into new products. In this scenario, large corporations are entrepreneurial when they recognize the commercial potential of an invention and organize their resources to turn it into a commercially viable innovation. But outside of economics, our intuitive bias leans towards the creative side, innovating new kinds and categories of business as well as opening new businesses and brands. That’s the glamorous, wealthy meaning—the one people want to adopt as striver mindset.
Ask a roomful of business school students what the main traits of entrepreneurs are, and they will generate a working profile of Andrew Carnegie, who arrived in the US desperately poor, but through talent, grit, work ethic, and ambition, became through US Steel the richest American of all time. They will generate something like the following array of traits:
1) Disciplined; 2) Confident; 3. Open-minded; 4) Self-starter; 5) Competitive; 6) Creative; 7) Determined; 8) Strong people skills; 9) Work Ethic, and 10) Passion (the top quality - they love their enterprise and continually work at it).[iii]
These ten striver qualities can be distilled to one extremely enterprising profile of high-ambition success. They match up perfectly with US autonomy as the platform of success. These make up a working definition of a successfully self-guided business owner / innovator. No special training required – it’s a self-declared identity, not a profession. Proof of expertise involves not long training or formal qualifications but real-time testing on the ground, in the real economy, requiring raising capital and inspiring confidence—among investors, and most important, customers. Americans have always applied their talents and resources to create opportunities for profit yielding high personal reward—linked to benefits for society and the consumer. This comes as close as it gets as a working definition of the pursuit of happiness—fueled mainly by willpower paired with creative intelligence and the creation of opportunity through business leadership. But is this a lifestyle rather than a profession?
Born or bred?
The intriguing question is how many of the sterling traits above can be trained or even acquired – since entrepreneur isn’t a certified profession but a cultural design that can be pursued widely. But how does anyone, no matter how determined, attain success in this style? At the top levels, success is achieved only by a select few who can naturally play the character. In this sense, entrepreneurs are born, not made, and business schools can only hope that their graduates fall into the first category. President Trump may fit the role of entrepreneurial leader, but his values fail to fit the American template of fairness, and his creation of conflict and contention damages his image and popularity ratings.
Can you be an unsuccessful entrepreneur? Yes. If it’s a style, it can be radiated without the attendant balance-sheet results. And as a lifestyle, being entrepreneurial doesn’t rely on being employed. Lots of businesses fail—part of the diploma--because the audience / customer / consumer part isn’t right. As James Paine has put it, “One of the most common (and deadly) mistakes in entrepreneurship is creating a solution before identifying the problem.”[iv]
Getting the human factors right is the keystone to good entrepreneurship. Having the enterprising mindset and resilience is only half the story. Entrepreneurship is not about the Big Idea. It’s about filling an unsatisfied need. Before proposing any solution, you first have to define the need and the cultural issues clearly for yourself and your investors.
Understand this and you can figure out how to solve the problems uniquely.
Next Blog: Part II, Entrepreneurs to Enterprisers: Framing the Problem